U.S. home prices climbed in March at the strongest rate in nearly three years as a dwindling supply of houses for sale is causing prices to significantly outpace income growth.
The Standard & Poor’s CoreLogic Case-Shiller 20-city home price index released Tuesday rose 5.9 percent over the past 12 months ended in March, the most since July 2014. Home values are increasing at more than double the pace of average hourly earnings, making it more difficult for many people to afford to buy a home.
In the Chicago area, home prices tracked by the index climbed 5.1 percent over the 12 months ending in March, which was more modest growth than experienced in most other major cities. Yet, for the Chicago area, the gains were significant. In March, Chicago prices reached the highest level since December 2008, although they remained 18.7 percent below the September 2006 peak. On a monthly basis they were showing stronger momentum than most cities as they climbed 1.1 percent in March over February.
“Over the last year, analysts suggested that one factor pushing prices higher was the unusually low inventory of homes for sale,” said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. “People are staying in their homes longer rather than selling and trading up.
A steady job market has bulked up demand among many would-be buyers, but there are fewer properties on the market. Sales listings have plummeted 9 percent over the past year to 1.93 million, according to the National Association of Realtors. The shortage of homes to buy has caused prices to rise sharply in many metro areas.
The largest annual gain was in Seattle, where prices have surged 12.3 percent. Portland, Oregon recorded a 9.2 percent increase, while Dallas prices rose 8.6 percent.
Of the 20 cities in the index, the weakest gain was in New York City_an area where home prices are already high relative to median incomes. Home prices in New York City have risen 4.1 percent in the past year, still much higher than U.S. average hourly earnings that have increased 2.5 percent over the past 12 months, according to the Bureau of Labor Statistics.